2015/2016 Annual Report
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™ 2015/16Your Life.ANNUAL Connected. REPORT Yours to Share Colleen Cameron Account Executive – Aboriginal Market Letter of Transmittal Regina, Saskatchewan June 30, 2016 Her Honour The Honourable Vaughn Solomon Schofield, S.O.M., S.V.M., Lieutenant Governor of Saskatchewan Dear Lieutenant Governor: I have the honour to submit herewith the annual report of SaskTel for the 15-month period ending March 31, 2016, including the financial statements, duly certified by auditors for the Corporation, and in the form approved by the Treasury Board, all in accordance with The Saskatchewan Telecommunications Holding Corporation Act. Respectfully submitted, Honourable Jim Reiter Minister Responsible for Saskatchewan Telecommunications Minister’s Message On behalf of Premier Brad Wall and the Government of Saskatchewan, I am pleased to present the 2015/16 SaskTel Annual Report. The report covers a 15-month period from January 1, 2015, to March 31, 2016, following a decision to align the fiscal period for all Crown Corporations with the Government of Saskatchewan’s fiscal year. For more than a century, SaskTel has been integral to the growth and development of the province. Today, Saskatchewan people are connected like never before with the ability to use technology to keep in touch with family and friends, as well as conduct business. Saskatchewan businesses that create jobs are also better able to connect with and serve their customers, and even Governments have access to more advanced solutions to provide essential services to residents. All across the province, SaskTel continues to deliver on its commitment to deploy next-generation technologies. Since 2007, the corporation has invested more than $2.4 billion in capital expansion and upgrades. This is helping to better deal with the increase in competition, customer expectations and industry regulations. I am proud of SaskTel’s success in adapting to these changes by evolving into a leading Information and Communications Technology (ICT) provider. As SaskTel evolves to meet demand, it is connecting rural, remote and First Nations communities. These communities are eager for partnerships to advance their social and economic policies. For example, an important partnership between the Canoe Lake Cree First Nation (CLCFN), Primrose Lake Economic Development Corporation and the Meadow Lake Health and Social Development Authority (MLHSDA) resulted in 4G being deployed in Jans Bay and Canoe Narrows for the first time. Looking ahead, SaskTel will continue to deliver on the Government’s plan for growth, which includes investments in infrastructure. These include investments in bandwidth and cellular infrastructure, broadband upgrades and fibre to the home in large centres. The success of our Crown Corporations requires the support of residents, businesses and most importantly, employees. On behalf of the Premier and the Government, I want to thank the board, management and employees at SaskTel for their hard work and commitment. Honourable Jim Reiter Minister Responsible for Saskatchewan Telecommunications SASKTEL 2015/16 ANNUAL REPORT | 1 Contents Letter of Transmittal 1 Minister’s Message 3 Financial Highlights 5 President’s Message 8 Sharing Our Stories 8 Seeing Through the Cloud 10 Meeting the Need for Speed 12 Rolling Up Our Sleeves 14 Putting Out Fires 16 Bringing Technology to Rider Nation 18 CSR Highlights 23 Management’s Discussion and Analysis 75 Consolidated Financial Statements 75 Management’s Responsibility for Financial Statements 76 Report of Management on Internal Control over Financial Reporting 77 Independent Auditors’ Report 78 Consolidated Financial Statements 81 Notes to Consolidated Financial Statements 111 Board of Directors 115 SaskTel Executive 118 Corporate Directory 119 Corporate Governance Statement IBC Contact Us 2 | CONTENTS Financial Highlights FINANCIALS CUSTOMER NETWORK Net Income ($ Millions) 2015/16 Internet Accesses 2015/16 Capital Expenditures 150 Dial Up 3.2% DSL 81.5% Product Development 2.2% Other 4.0% $29.0 $126.7 Buildings & Fibre 13.7% Equipment 8.1% Wireline – Fibre 29.0% $4.6 $13.9 $3.4 $0.9 Fusion 1.6% $26.7 $1.4 $104.2 100 266,237 IT Infrastructure $76.4 Accesses 11.9% $378.0M Wireline – 50 Wireless Copper 8.6% 20.9% 2014 Costs Wireline – 2015/16 Services Revenue Fibre network enhancements are contributing Other 15.3% Goods and Net Salaries Q5 2015/16 Net Finance Net Finance to a resurgence in Internet access growth. Other Income Dep’n & Amort 2016/17 Budget In 2015/16, fibre access via SaskTel’s infiNET Net income increased due to a 2.2% growth in product grew 78.9% and contributed to overall SaskTel invests significant dollars to deliver revenue, a 0.6% decline in operating expenses, Internet access growth of 2.6%. an advanced ICT core to our customers. and an additional three operating months as Number of During 2015/16, SaskTel invested in fibre-based a result of a change in SaskTel’s year end from Accesses technologies ($69.9 million), advanced wireless December 31 to March 31. technologies like LTE and LTE-TDD, and 50 100 150 spectrum ($76.8 million), and other network improvements ($85.1 million). Data Usage & Network Revenues ($ Millions) Technology Accesses Fibre to the Premises (Homes) TERABYTE OF DATA SERVED PER MONTH BY THE WIRELESS NETWORK Other 2.0% Local & Enhanced 18.4% 2,500 700,000 160,000 600,000 140,000 Advertising, Security 2,000 and Software 5.6% 500,000 120,000 1,500 400,000 100,000 300,000 Equipment 5.2% 1,000 80,000 TERABYTE 49.9% 200,000 Long 60,000 500 maxTV, Distance 3.7% 100,000 39.9% 40,000 Internet, Data 25.8% 0 0 27.4% 20,000 $1,574.4M Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Wireless 13.6% 39.3% ACCESSES ■ CDMA ■ 4G ■ LTE 0 2012 2013 2014 2015/16 ■ Passed ■ Connected Revenue from wireless, maxTV, Internet and data Wireless revenues continue to grow in direct Fibre is a key component in providing the high continue to represent 65.1% of revenues. SaskTel’s correlation to SaskTel’s investment to increase bandwidth (up to 260 Mbps) that customers are network investments in LTE and fibre allow capacity and speeds on its wireless network. demanding. To date, the fibre build focused on customers to adopt new plans with increased Customers are subscribing to larger tier data communities of Regina, Saskatoon, Moose Jaw, data speeds and advanced features. Local access, plans in order to satisfy their data consumption Prince160000 Albert & Swift Current. SaskTel expects 160000 enhanced features and long distance revenues needs. The trend is expected to continue as to spend $51.0 million in 2016/17 to continue 140000 continue to decline. This is primarily attributed to customers continue with wireless substitution rollout128000 of fibre to these communities, as well as wireless substitution and limited organic growth and as a new “cord nevers” enter the market. Weyburn & Estevan. 120000 as a result of “cord nevers.” 96000 100000 80000 SASKTEL 2015/16 ANNUAL REPORT | 3 Sharing our Stories President’s Message SaskTel is in the business of making it easy for people to connect to one another and to the world that exists across town or across the planet. How that happens is our job as an ICT company, and I think we do that job pretty well, but there is another question that drives nearer the heart of SaskTel’s reason to be, and that is to get beyond the how and ask why? Why do we work so hard to connect our customers increasing speeds. We are now well positioned to and why do our customers want to connect? The provide the bandwidth we need to accommodate answer has a lot to do with a very human impulse to customer growth in these two centres. reach out and share something—an idea, a laugh, a Speed is something we work very hard to achieve in product. Share buttons on social media are merely the our LTE offering. When U.K.-based OpenSignal group most overt examples of the phenomena that have us looked at LTE providers around the world, testing using our phones and computers every day to send out average download speeds among 185 providers, messages and images to those who matter to us most. we tied with two Singapore providers for first place. Offering what is yours to share by following that basic This top global ranking is a direct result of the desire to be heard, to move and be moved by others, work our Technology and Operations groups have is part of what makes the human community complex accomplished in recent years, delivering unparalleled and fascinating. SaskTel provides the connectivity, wireless service to communities in Saskatchewan. the platforms for that sharing impulse, by continually As well, in early 2016, we began to apply some new upgrading and improving the systems that make it wireless technologies. We started to test and install effortless for our customers to engage in and express microcells in some areas and we were the first in that desire for connection and community. North America to deploy a new Ethernet-based antenna system—Huawei’s LampSite—which I can OUR INVESTMENT IN INFRASTRUCTURE report is doing very well. This past year was one of our finest for improving The rest of the annual report will provide details on those platforms and systems our customers depend these and many other investments we made from on. Our Fibre to the Premises (FTTP) program passed January 2015 to March 2016, in order to ensure that 38,986 homes with infiNET, putting us on schedule our residential and business customers continue to for our target of passing 100% of homes in the nine receive the best wireless, maxTV, Internet, data and major centres in the province by 2022.